Sound financial decisions are key to individual well-being and non-participation in the stock market can incur sizable welfare loss for individuals. As the financial service industry is becoming increasingly complex, scholars and policymakers have recognised the importance of financial education, which presumably should raise the financial literacy level of society. The broad literature on stock market participation however, shows that the overall participation rate is rather low in general. This phenomenon has puzzled researchers given that basic financial economics theory prescribes universal participation.  Lack of understanding of the basic concepts in economics and finance has been shown to prevent people from participating in the stock market alongside financial illiteracy - often linked to high-cost borrowing, family financial stress, and difficulties in coping with financial crisis.

New research from Ting Dong, Henrik Nilsson (Department of Accounting, Stockholm School of Economics), and Florian Eugster (University of St.Gallen) focused on the effect of business education on stock market participation. Using unique stock ownership data of students from a business school in Sweden, the results revealed a significant increase in stock ownership during and after their studies at the school compared to before entering the school. The marginal effects were 3.8% for the first two years of the core curriculum, 4.4% for the specialisation year, and 4.3% for the three years following graduation. The positive effect of business education on stock market participation was mainly driven by students interested in accounting or finance subjects, with the effect more pronounced for females than for male students.

The study highlights that the effectiveness of business school education relies heavily on individual motivation. Students interested in accounting/finance subjects were more likely to own a stock even before entering the business school, and they responded strongly to the business education in the school. Consequently, the implications of the study informs policy makers who are investing extensive resources in education with the aim of improving citizens' financial behaviour.

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